Friwat v. Pack

Filed 4/13/06 Friwat v. Pack CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Michael M. Anello, Judge. Affirmed.

In this appeal, AFM Petroleum, Inc. (AFM) and Joseph Friwat (collectively, the AFM Parties) challenge the trial court's rulings on their claims against Maurice Pack for intentional interference with contractual relations and negligent and intentional interference with business advantage. The AFM Parties contend that the trial court: (i) improperly granted summary judgment on the interference with contract claim because a triable issue of fact remained as to whether Pack's purchase of certain real property interfered with their contractual right to purchase the same property; and (ii) improperly sustained Pack's demurrer to the interference with business advantage claims because, contrary to the court's ruling, they adequately pled wrongful interference by Pack. Our evaluation of these contentions reveals them to be without merit. Consequently, we affirm the judgment.

FACTS

In August 2000, Friwat on behalf of AFM, and James Koo and Yon Sook Koo (the Koos) signed a three-page agreement (the Lease/Purchase Agreement) that outlined terms for AFM to lease a parcel of property owned by the Koos at 680 West San Marcos Boulevard, San Marcos, California (the Koo Property). Among the terms of the Lease/Purchase Agreement, AFM received a five-year "first right to purchase" the Koo Property at a price of $1,660,000.

In May 2001, the Koos and AFM entered into a 46‑page "Ground Lease." The initial recital in the Ground Lease states that the purpose of the agreement was to enable AFM to lease the Koo Property "for the purpose of constructing a gas station, convenience store [and] quick service restaurant . . . as set forth in this Lease." The Ground Lease contains a provision that obligates the Koos to subordinate their financial interest in the property to that of AFM's lender under certain conditions.

The AFM Parties contend that after entering into these agreements, the Koos violated their contractual obligations by refusing to subordinate their interest in the Koo Property; offering to sell the Koo Property to a third party; and later selling the Koo Property to Pack.

In August 2003, the AFM Parties consolidated their disputes regarding these and related transactions into the instant lawsuit, filing suit against the Koos and a number of other defendants who are not parties to this appeal.^[1] The AFM Parties named Pack as a "Doe" defendant on March 1, 2004.

After Pack successfully demurred to the causes of action alleged against him, the AFM Parties filed a second amended complaint, alleging causes of action against Pack for, inter alia, fraud, intentional interference with contractual relationship, and intentional and negligent interference with prospective business advantage -- all based on Pack's efforts to purchase the Koo Property while the Koos were allegedly obligated to sell the Koo Property to the AFM Parties. Pack again filed a demurrer, and again the demurrer was sustained as to all of the causes of action alleged against him.

With respect to the causes of action for intentional and negligent interference with prospective business advantage, the trial court ruled that the AFM Parties' allegations were insufficient because the AFM Parties "pled no facts to establish that defendant Pack engaged in any independently wrongful conduct," apart from the fact of the interference itself, as required for those torts. The court dismissed these causes of action without leave to amend because the AFM Parties "offer[ed] no suggestions on how they might amend their complaint to allege such facts."

The trial court granted the AFM Parties leave to amend their complaint as to the cause of action for intentional interference with contractual relationship. In December 2004, the AFM Parties filed a fourth amended complaint, alleging this sole cause of action against Pack.^[2] Pack moved for summary judgment.

The trial court granted Pack's motion for summary judgment, rejecting the AFM Parties' argument that "Pack intentionally interfered with the Plaintiffs['] contract with Koo to purchase the Koo [Property] . . . when Pack entered into an Agreement with Koo to purchase the Koo [Property]" in late 2003. The court ruled that the evidence demonstrated that Pack's alleged interference was unrelated to any breach or disruption of the Koos' agreement to sell the Koo Property to AFM, noting that the AFM Parties' own evidence demonstrated that the Koos' breach of the contractual relationship, if any, occurred before November 2003 -- the date when Pack first became aware of the existence of any contractual relationship.^[3] Consequently, the court ruled, the uncontradicted evidence demonstrated Pack "did not intend to and did not cause" the breach of contract alleged by the AFM Parties. Instead, "any alleged breach occurred before defendant Pack had even expressed an interest in purchasing the subject property," and "Pack cannot be found to have intended to induce a breach of contract that he was not even aware of at the time the contract was breached." In sum, the court stated, "Pack could not have caused a breach of the contract in December 2003 when, according to plaintiff's own allegations, that contract was already breached by the time their complaint was filed in August of 2003."

DISCUSSION

The AFM Parties appeal both the trial court's ruling on their cause of action for intentional interference with contract, and its ruling on their causes of action for negligent and intentional interference with business advantage. We address each of these contentions below.

I

The Trial Court Did Not Err in Granting Pack's Motion for Summary Judgment

The AFM Parties contend that the trial court improperly granted Pack's motion for summary judgment on its cause of action for intentional interference with contract because there remained triable issues of fact as to whether Pack intended to and did disrupt AFM's contractual relationship with the Koos.

A

Summary Judgment Standard

Under section 437c of the Code of Civil Procedure, a defendant may move for summary judgment by presenting evidence that one or more elements of the plaintiff's cause of action cannot be established. If the defendant makes "a prima facie showing" to this effect, it "causes a shift, and the [plaintiff] is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).) To meet that burden, the plaintiff "must 'set forth the specific facts showing that a triable issue of material fact exists as to that cause of action . . . .' " (Id. at p. 849.) "There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Id. at p. 850.) " 'When opposition to a motion for summary judgment is based on inferences, those inferences must be reasonably deducible from the evidence, and not such as are derived from speculation, conjecture, imagination, or guesswork.' " (Waschek v. Department of Motor Vehicles (1997) 59 Cal.App.4th 640, 647 (Waschek).)

B

The AFM Parties Failed to Demonstrate That Triable Issues of Fact

Remained on the Contract Interference Cause of Action

The AFM Parties fail on appeal, as they did in the trial court, to cite any evidence that Pack's alleged intentional interference was the cause of the complained of contract disruption. Accordingly, summary judgment in favor of Pack was proper.

To prove a cause of action for interference with contract, a plaintiff must establish the defendant's knowledge of the contract and intent to interfere, i.e., action " 'designed to induce a breach or disruption of the contractual relationship' " or with knowledge that such a disruption is " 'substantially certain to occur' " (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 55, 56), and that the defendant's intentional interference was the proximate cause of the contract breach or disruption alleged. (Dryden v. Tri-Valley Growers (1977) 65 Cal.App.3d 990, 997-998 (Dryden) ["A plaintiff, seeking to hold one liable for unjustifiably inducing another to breach a contract, must allege that the contract would otherwise have been performed, and that it was breached and abandoned by reason of the defendant's wrongful act and that such act was the moving cause thereof"].) "Unless the act complained of is the proximate cause of the injury there is no liability." (Hill v. Progress Co. (1947) 79 Cal.App.2d 771, 780 (Hill).)^[4]

Here, the record evidence demonstrates that any breach or disruption of the contractual relationship between the Koos and AFM occurred well before Pack became aware of that relationship in November 2003. Thus, as the trial court ruled, Pack's intentional interference with that relationship could not be the proximate cause of the disruption alleged.

There is abundant evidence that assuming a contractual relationship existed between the Koos and AFM, that relationship was disrupted well before November 2003.^[5] As the trial court stated, a compelling indication of this fact is that the AFM Parties filed the instant lawsuit, alleging that the Koos breached their contractual obligations, in August 2003.^[6] In addition, Friwat's own declaration in opposition to Pack's motion for summary judgment, much of which is referenced in the AFM Parties' recitation of facts in its brief on appeal, includes overwhelming evidence that the Koos' alleged breach of their obligation to sell the Koo Property to AFM occurred prior to and not because of Pack's purported intentional interference. According to Friwat's declaration and as quoted in the AFM Parties' opening brief: (1) The Koos violated the terms of AFM's "first right to purchase" in December 2001 when, "without Friwat's knowledge," James Koo "offered to sell [the Koo Property] to [another defendant] for $2,000,000 despite the fact that Koo had given AFM and Friwat a first right to purchase in the Lease/Purchase [A]greement"; (2) James Koo informed Friwat on May 22, 2003, "that Koo wished to unilaterally terminate the Lease/Purchase Agreement"; (3) James Koo informed Friwat on June 12, 2003, that he would not subordinate his interest in the Koo Property to Friwat's financing, allegedly in breach of his contractual obligations; (4) Friwat informed the Koos on June 26, 2003, that AFM was "ready to proceed" with the purchase of the Koo Property and "was exercising its first right to purchase under the Lease/Purchase [A]greement," but "never received a response;" and (5) Friwat repeatedly sent letters to the Koos prior to August 2003, urging them to perform their contractual obligations, to which the Koos never responded; after Friwat sent the Koos a letter on July 31, 2003, urging them to move forward with the project "rather than get into litigation," to which the Koos did not respond, Friwat informed his bank of "Koo's refusal to subordinate" and "Koo's breach of our escrow and contract." Friwat then "directed [his] lawyer to proceed with the litigation against [the Koos] for failure to perform" their contractual obligations.^[7]

In light of this evidence, the burden of production in the trial court shifted to the AFM Parties to "make a prima facie showing of the existence of a triable issue of material fact" with respect to the issue of whether Pack's intentional interference was the proximate cause of the Koos' failure to perform their alleged contractual obligations. (Aguilar, supra, 25 Cal.4th at p. 850.) To avoid summary judgment, the AFM Parties were required to " 'set forth the specific facts' " that "would allow a reasonable trier of fact to find" that Pack's interference after November 2003 was the cause of the Koos' nonperformance. (Id. at pp. 849, 850.) The AFM Parties did not do so.

The AFM Parties cited no evidence either below or on appeal that would support a conclusion that Pack's intentional interference after November 2003, as opposed to some earlier cause, disrupted the contractual relationship between AFM and the Koos. Rather, the AFM Parties assert that if the contractual relationship with the Koos was still "in effect" in November 2003, Pack's actions must be inferred to have caused the Koos to repudiate their contractual obligations at that point. Given the overwhelming and undisputed evidence of the Koos' long-standing and continuous refusal to honor their purported contractual obligations well prior to November 2003 -- including the AFM Parties' filing of this lawsuit for breach of contract against the Koos in August 2003 -- the suggested inference is pure speculation and therefore not sufficient to defeat a motion for summary judgment. (Waschek, supra, 59 Cal.App.4th at p. 647; Dryden, supra, 65 Cal.App.3d at p. 997 [interference claim properly dismissed where allegations "conclusively demonstrate that the performance of the disputed contracts had been abandoned and discontinued . . . many months prior to the [alleged interference]"].)

In sum, given the total absence of evidence that Pack's alleged intentional interference caused the Koos to breach any contractual obligation, the cause of action for intentional interference fails. (Dryden, supra, 65 Cal.App.3d at p. 996 [causes of action are "fatally defective" where they "not only fail to indicate that respondent induced or otherwise purposely caused the breach of the contract, but also fail to allege that at the time of [the interference] respondent was even aware of the existence of [the] previous contracts"]; Hill, supra, 79 Cal.App.2d at p. 780 [interference with contract claim properly dismissed against trucker where evidence showed only that he "continued to haul drums under an arrangement with the company after plaintiff told him he had a contract for all the hauling," but did not demonstrate that trucker's actions, rather than company's earlier actions, caused the company to breach].)

In reaching this conclusion, we reject the AFM Parties' contention that the trial court was somehow precluded from concluding that the Koos breached the contract, if at all, prior to November 2003, because in granting the Koos' summary judgment motion the trial court ruled there had been no breach. Putting aside the question of whether such a contradiction, given the procedural posture of this appeal, would constitute grounds for reversal, we fail to see any inconsistency in the court's rulings. With respect to the cause of action against Pack, the trial court simply assumed -- as we do here -- that even if the Koos breached the contract, "any alleged breach occurred before defendant Pack had even expressed an interest in purchasing the subject property" and thus could not be charged to Pack. (Italics added.) Thus, the court's ruling was based on an alternate ground that was expressly independent of, and not inconsistent with, its earlier ruling that the AFM Parties failed to produce evidence that would support a breach of contract claim against the Koos.^[8]

There is an additional, independent basis for our rejection of the AFM Parties' argument on appeal, namely, that the contention they assert here -- that Pack interfered with the Koos' obligation to sell the Koo Property to AFM -- contradicts the argument they presented at the hearing on the summary judgment motion. (See North Coast Business Park v. Nielsen Construction Co. (1993) 17 Cal.App.4th 22, 29 [party who opposed summary judgment on one ground may not appeal on a different ground as it "would be manifestly unjust to the opposing parties, unfair to the trial court, and contrary to judicial economy to permit a change of theory on appeal"]; People v. Pijal (1973) 33 Cal.App.3d 682, 697 ["It is, of course, well established that the defendant is bound by the stipulation or open admission of his counsel and cannot mislead the court and jury by seeming to take a position on issues and then disputing or repudiating the same on appeal"].) At the summary judgment hearing, the AFM Parties argued that Pack intentionally interfered with the Koos' performance, not of the purported obligation to sell the Koo Property to AFM, but rather of an unspecified and unpled contractual obligation to return a $100,000 downpayment on the Koo Property that Friwat had allegedly paid to the Koos. Contrary to the argument presented in its appellate briefing, counsel for the AFM Parties repeatedly insisted "that's the interference in this particular case" -- "not the other [contractual] issues with Mr. Koo."^[9]

II

The Trial Court Properly Granted Pack's Demurrer to the AFM Parties' Causes of

Action for Negligent and Intentional Interference with Prospective Business Advantage

The AFM Parties contend that the trial court's ruling on Pack's demurrer was erroneous because they sufficiently pled independently wrongful conduct on Pack's part, namely that he defrauded them.

"To prevail on the interference with prospective economic advantage causes of action, [a plaintiff] has the burden of proving not only that respondents knowingly or negligently interfered with an economic relationship, but that they engaged in conduct that was wrongful by some legal measure other than the fact of interference itself." (Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1242 (Tuchscher).) "[A]n act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard." (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1159 (Korea Supply).)

In reviewing a ruling on a demurrer, we independently determine whether the complaint states a cause of action. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125 (Moore).) "[W]e assume that the complaint's properly pleaded material allegations are true and give the complaint a reasonable interpretation by reading it as a whole and all its parts in their context. [Citations.] We do not, however, assume the truth of contentions, deductions, or conclusions of fact or law." (Ibid.)

The AFM Parties contend that their second amended complaint "did, in fact, allege that Pack committed an independent wrong -- Friwat alleged that Pack defrauded Friwat." For this contention the AFM Parties cite the allegations in their defunct fraud cause of action,^[10] contending that even though the cause of action was stricken by the trial court on Pack's demurrer, the allegations of Pack's wrongful (i.e., fraudulent) conduct survive and are sufficient to support the causes of action for interference with business advantage. We disagree for two reasons.

First, even if we were to accept the AFM Parties' contention that their allegations of fraudulent conduct survived the dismissal of the fraud cause of action, an issue which we need not decide, those allegations do not aver that Pack defrauded AFM, as the AFM Parties contend. Rather, they allege that the Koos did so. After setting forth alleged misrepresentations made by the Koos, the complaint then summarily states: "In doing the acts herein complained of, KOO and PACK acted with fraud, oppression, and malice" allegedly "entitl[ing] [the AFM Parties] to receive punitive and exemplary damages." Thus, the allegations cited by the AFM Parties to support the contention that an independently wrongful act on Pack's part was adequately pled are that the Koos made false representations to Friwat, and in so doing "PACK acted with fraud." These allegations are insufficient. (Moore, supra, 51 Cal.3d at p. 125 [reviewing court does not "assume the truth of contentions, deductions, or conclusions of fact or law"].)

Second, even if we could read the second amended complaint to allege that Pack defrauded AFM, the interference claims would still fail because there is no allegation that this fraud was itself the actionable interference. (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 342 (LiMandri) [for claim of interference with business advantage "plaintiff must allege the conduct constituting the interference was itself wrongful by some other measure beyond the fact it amounted to interference," italics added; allegation that defendant "engaged in tortious conduct distinct from . . . the conduct constituting the actual interference" is insufficient].) The fraud alleged in the AFM Parties' complaint is that the Koos falsely stated they would sell the Koo Property to AFM and subordinate their financial interest in that property, inducing AFM to enter the Lease/Purchase Agreement. Pack's interference, however, is alleged to be a completely separate (and inconsistent) act, which occurred much later when Pack "solicited KOO to purchase the New ARCO Site and ultimately did purchase the New ARCO Site from KOO."^[11] The requisite factual allegations that Pack's interference, i.e., the solicitation to purchase the site, was itself fraudulent or otherwise unlawful as measured by "some constitutional, statutory, regulatory, common law, or other determinable legal standard" is absent.^[12] (Korea Supply, supra, 29 Cal.4th at p. 1159.) Consequently the AFM Parties' interference with business advantage claims would still be deficient even if the complaint alleged that Pack engaged in the fraud asserted. (LiMandri, supra, 52 Cal.App.4th at p. 342 [holding that "alleged misappropriation of LiMandri's name" does not qualify "as 'independently wrongful' conduct under Della Penna [v. Toyota Motor Sales, U.S.A., Inc.(1995) 11 Cal.4th 376] because while it may have been independently tortious, it was not the act that constituted the interference with LiMandri's prospective advantage"]; Tuchscher, supra, 106 Cal.App.4th at p. 1243 [defendants actions not actionable because they "were not parties to the negotiating agreement and thus they were not bound by any contractual obligation or duty to refrain from taking steps -- either among themselves or with [a party] --to push their own development ideas . . . . Assuming respondents had talks with the City or its representatives regarding Crystal Bay, such talks do not make respondents' communications wrongful apart from the (presumed) interference"].) We therefore reject the AFM Parties' contention that the trial court erred in sustaining Pack's demurrer to the interference with business advantage causes of action.

DISPOSITION

Affirmed.

IRION, J.

WE CONCUR:

McDONALD, Acting P. J.

McINTYRE, J.

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^[1] The Koos moved for summary judgment in June 2004. The trial court granted the Koos' motion and entered judgment in their favor. The AFM Parties appealed that ruling in Friwat v. Koo, case No. D045818. In a separate opinion issued concurrently with this opinion, we find the AFM Parties' contentions in that case to be without merit.

^[2] The AFM Parties' third amended complaint was struck by the trial court for reasons that have no relevance to this appeal.

^[3] The court emphasized that the AFM Parties' lawsuit "for breach of contract against the Koo[s], among others, was filed in August 2003," and the evidence submitted by the AFM Parties, including "Friwat's own declaration," showed "that defendant Koo was refusing to subordinate and refusing to otherwise perform his alleged contractual obligations from June through August 15, 2003."

^[4] (See also 5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, § 738 ["It must be alleged and proved that the defendant's act caused the breach, i.e., that otherwise the contract would have been performed"]; Eltolad Music, Inc. v. April Music, Inc. (1983) 139 Cal.App.3d 697, 706 [trial court erred in "instructing the jury that plaintiff had the obligation to prove that defendant [] was 'a' moving cause" rather than " 'the' moving cause" of the contract breach], citing Dryden, supra, 65 Cal.App.3d 990; Beckner v. Sears, Roebuck & Co. (1970) 4 Cal.App.3d 504, 507 ["It is the settled rule in actions for wrongful interference with contract rights that an essential element of the cause of action is that the conduct charged be the procuring cause of the interference and the harm"].)

^[5] In their appellate briefing, the AFM Parties did not dispute the trial court's ruling that the undisputed evidence showed Pack was not aware of the contract between the Koos and AFM until November 2003 at the earliest, arguing instead that summary judgment was not proper because there was a factual dispute regarding whether Pack disrupted the contract "in November 2003." Similarly, the AFM Parties did not present any facts to dispute this contention in the trial court. In their response to the contention in Pack's separate statement of facts, the AFM Parties stated only, "Deny, for lack of knowledge and for lack of discovery . . . ." For the first time at oral argument, counsel for the AFM Parties referenced a June 2003 letter from a real estate broker that purported to offer to purchase the Koo Property on behalf of Pack. We need not decide what, if any, relevance this letter has to the AFM Parties' claims as the AFM Parties did not rely on the letter in the trial court or in their appellate briefing. (Kinney v. Vaccari (1980) 27 Cal.3d 348, 356-357, fn. 6 ["An appellate court is not required to consider any point made for the first time at oral argument, and it will be deemed waived"]; Peart v. Ferro (2004) 119 Cal.App.4th 60, 70 [" 'unless they were factually presented, fully developed and argued to the trial court, potential theories which could theoretically create "triable issues of material fact" may not be raised or considered on appeal' "].) In addition, even if the letter were properly before us, the letter does not support an inference that Pack knew or should have known about the Koos' contractual relationship with AFM in June 2003.

^[6] In that complaint, the AFM Parties not only alleged that the Koos breached their contractual obligations, but also that the Koos and the other defendants fraudulently led the AFM Parties to believe that they had an exclusive right to purchase the Koo Property when in reality the defendants were looking at "multiple potential candidates."

^[7] The quoted language in point (5) comes from Friwat's declaration, while the quoted language in points (1)‑(4) comes from the AFM Parties' opening brief on appeal, which cites that declaration for the facts recited.

^[8] The court ruled: "Because the motion is decided on the ground stated above, the court need not address the issue of whether the court's previous ruling on the Koo defendants' motion for summary judgment has some sort of collateral estoppel effect as to the remaining parties and causes of action."

^[9] At the hearing, the AFM Parties' counsel argued solely that AFM's inability to get a refund of the $100,000 was "the interference we're talking about in this Complaint with Mr. Pack" as opposed to interference "with the lease purchase option agreement with Mr. Koo [or] the other issues of the contract"; Pack "bought that property [in December 2003] without paying that $100,000, that's the interference in this particular case." Counsel contended that the court needed to understand what "this cause of action is and what it is not. It is not the other issues with Mr. Koo. It is the $100,000 . . . encumbering the property"; the $100,000 is "what's being interfered with here by Mr. Pack. That $100,000, that still hasn't been paid. That's the gravamen of this intentional interference cause of action"; "but for Mr. Pack's interference, my client would have been paid that $100,000 [and] wouldn't have had to file a separate action [referring to a different proceeding in another court] to get paid."

^[10] As noted earlier, the trial court sustained Pack's demurrer to the AFM Parties' fraud cause of action at the same time it sustained the demurrer to the causes of action for interference with business advantage. The AFM Parties do not challenge the court's ruling on the fraud cause of action on appeal.

^[11] According to the complaint, "[b]y soliciting KOO and by purchasing the New ARCO Site, Defendants [Pack and Does 3-20] have interfered with the business advantages that FRIWAT, and his assignee, AFM, reasonably expected to receive as a result of owning and operating the New ARCO Site."

^[12] The elements of a fraud claim are: false representation as to a material fact, knowledge of its falsity, intent to defraud, justifiable reliance and resulting damage. (Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1331.)